1987 (12) TMI 36 - HC - Central Excise

Issues Involved:

1. Validity of the Assistant Collector's order changing the classification of the petitioners' products.
2. Binding nature of the Central Board of Excise and Customs' telex on quasi-judicial authorities.
3. Compliance with principles of natural justice.
4. Proper classification of the petitioners' products under the Central Excise Tariff.

Issue-wise Detailed Analysis:

1. Validity of the Assistant Collector's Order Changing Classification:

The petitioners challenged the order passed by the Assistant Collector on the Classification List dated March 9, 1987, which changed the classification of their products from Tariff Item No. 7208.00 to Tariff Item No. 7308.90. The petitioners argued that the Assistant Collector could not have changed the classification without following the prescribed procedure and without affording an opportunity of hearing, thus violating principles of natural justice. The court agreed, stating that the Assistant Collector's orders were based on extraneous considerations and were without jurisdiction. Consequently, the court quashed and set aside the orders dated June 30, 1987, passed by the Assistant Collector.

2. Binding Nature of the Central Board of Excise and Customs' Telex on Quasi-Judicial Authorities:

The petitioners contended that the directions given by the Superintendent and the Assistant Collector were in pursuance of the directions contained in the telex issued by the Central Board of Excise and Customs. The court held that the instructions or guidelines contained in the Board's telex, being administrative instructions, are not binding on authorities performing quasi-judicial functions. The Assistant Collector should not have allowed himself to be influenced by the telex and should have made an independent decision. The court emphasized that Section 37-B of the Act does not permit such instructions to interfere with quasi-judicial functions.

3. Compliance with Principles of Natural Justice:

The petitioners argued that the orders passed by the Assistant Collector were violative of principles of natural justice as they were not afforded an opportunity of hearing. The court observed that the previous correspondence between the parties did not constitute a proper opportunity of hearing. The Assistant Collector was required to afford an opportunity of hearing to the petitioners before changing the classification. Since this was not done, the court quashed the orders dated June 30, 1987, passed by the Assistant Collector.

4. Proper Classification of the Petitioners' Products Under the Central Excise Tariff:

The petitioners contended that their products, which are roughly shaped pieces of forgings, are classifiable under Tariff Item No. 7208.00 and not under Tariff Item No. 7308.90. The court did not delve into the proper classification of the products but directed the excise authorities to decide the question of proper classification after examining the system adopted by the Legislature for classification, the scheme of the Act, and the Finance Minister's speech introducing the change in the classification method in 1986. The court emphasized that the H.S.N. method has not been adopted completely and in respect of all items, and the excise authorities must consider this while determining the proper classification.

Conclusion:

The petition was partly allowed. The court quashed and set aside the orders passed by the Assistant Collector dated June 30, 1987, and the show cause-cum-demand notice dated July 6, 1987. The Assistant Collector was directed to proceed with the scrutiny and grant of approval to the classification lists filed by the petitioners, considering the aspects highlighted by the court. The court made the rule absolute to the extent indicated, with no order as to costs.

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